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Creating a Single African Market on Trade in Services: Negotiating the Schedules of Specific Commitments under the Protocol on Trade in Services

By Beatrice Chaytor
26 Oct 2019
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Creating a Single African Market on Trade in Services: Negotiating the Schedules of Specific Commitments under the Protocol on Trade in Services

Introduction

The African Continental Free Trade Area (AfCFTA) is an economic game-changer for Africa. A major aim of this ambitious effort is the expansion of intra-African trade by lowering trade barriers to goods and services, as well as the movement of people throughout the continent. The AfCFTA is thus intended to be a key driver of integration, production and industrialisation, employment creation, income generation and poverty reduction. This mega trade arrangement, the first of its kind, will bring together fifty-five (55) African countries and eight (8) Regional Economic Communities (RECs), to create a single continental market, with a population of more than a billion people and a current combined gross GDP of USD1.2 trillion.

The fact that the AU Heads of State and Government decided to include trade in services in the first phase of negotiations for the AfCFTA when they launched it in 2012 is significant for the continent. Services have become a transformational force in the global economy, changing the structure of markets and accounting for the majority of GDP and employment in most African countries. Although Africa is playing catch up when it comes to global services trade and intra-African services trade is below par, there is now a real impetus to expand trade in services within Africa to enable a more diversified approach to the economies on the continent.

The Protocol on Trade in Services, part of the AfCFTA Agreement which was presented for signature in March 2018, entered into force along with the Agreement on 30th May 2019. However, the Protocol is merely a skeleton. The meat on the bones of this skeleton will be the schedules of specific commitments, and the framework for regulatory cooperation, to be annexed to the Protocol, along with any sectoral annexes. These, in effect will reflect the services trade liberalisation among State Parties, and determine the nature and character of the African single services market.

The Starting Point for Negotiation

As a starting point for liberalisation, the AU Heads of State and Government, in their Summit in July 2018, approved the five priority services sectors, namely, business, communication, financial, tourism and transport services, including their subsectors. Negotiations will shortly commence among the AU Member States in these priority sectors on the schedules of specific commitments, which the AU Assembly has requested to be completed and delivered to Heads of States by January 2020. To guide the negotiations, a set of Guidelines for Negotiating the Schedules of Specific Commitments was approved by the 8th meeting of African Ministers of Trade in Cairo in December 2018. The AMOT further guided negotiators on how the negotiations on schedules would proceed.

It was determined that for those AU member states that are WTO members, the starting point for negotiations on the schedules of specific commitments would be deeper commitments than are currently scheduled under the GATS (“GATS plus”). For those AU member states that are non-WTO members, the starting point for negotiations would be autonomous liberalisation at the national level. However, it will be important to establish a benchmark that can ensure comparable levels of commitments among the AfCFTA parties. Therefore each member state would be required to commit a minimum threshold of sectors and subsectors, in order to create the single market for services in Africa and to ensure that all AfCFTA state parties are starting from the same point, taking into account the principle of variable geometry enshrined in the AfCFTA Agreement. This threshold should reflect: a) substantial liberalisation of sectors and sub-sectors on a reciprocal basis; and b) effective elimination of barriers to trade in services. In addition, in scheduling their specific commitments, member states would use the GATS W/120 list for the classification of services sectors, and the latest UN CPC classification list for the sub-sectors.

Moreover, it should be noted that the approved Modalities on the trade in services negotiations stipulated “substantial sectoral coverage” with no a priori exclusion of any mode of supply, in order to satisfy the threshold in GATS Article V. The term “substantial sectoral coverage” is not expressly spelled out, so it is unclear what exactly it constitutes. It is noteworthy that the provision does not stipulate that all sectors must be included, but rather that all modes of supply must be covered. The guidance given by the AMOT states that there should be “substantial liberalisation of sectors and sub-sectors on a reciprocal basis”.

Who is Negotiating?

Although the Protocol on Trade in Services has entered into force, the negotiations on schedules and the regulatory frameworks constitute a substantial part of the outstanding work on Phase I of the AfCFTA negotiations. These negotiations have included all the fifty-five (55) AU member states. Therefore, the negotiations on schedules of specific commitments will proceed with all AU member states. However implementation of the eventual schedules will be the purview of the AfCFTA State Parties, which currently stand at twenty-seven (27).

Preparing the schedules of specific commitments

Each AU member state must prepare a schedule of specific commitments, which will outline specifically what treatment each country guarantees to provide to the other country, whether it is in market access, national treatment or additional commitments (such as standards and accreditation); and either horizontally or within different sectors.

The completed schedules are usually the result of what is known as a ‘request-offer’ process, whereby countries exchange a ‘request’ for certain concessions in their export market(s) and ‘offer’ concessions domestically in return. The process of preparing for these negotiations would necessarily require governments to develop both a request and an offer, which are in effect technical documents that translate national and regional services interests into specific negotiating positions. In that respect, both documents should ideally be founded on national development strategies, (services) export strategies, sectoral strategies and regional integration objectives.

As the negotiations on the schedules proceed, the process for making offers and requests may start with consultations among members of specific RECs to determine if they wish to make combined offers and requests on the five priority sectors. In some cases where the member states of a particular REC decide, the countries may choose to develop their offers and requests individually. The commitments in the schedules are typically undertaken by individual countries.

The Request

The request would usually deal with a country’s exports to another territory, and consider both actual and potential exports to the trading partner. Information will be required on a range of domestic and regional issues, including the state of actual market barriers in the priority sectors (as opposed to those set out ‘on paper’), the opportunities in each priority sector in the trading partner’s territory, and the competitiveness of these sectors in the region. The breadth and complexity of the priority sectors also necessitates broad consultations (particularly with the private sector) to ensure a representation of the diversity of views in the consultations. In parallel, there would need to be effort targeted at obtaining consensus on various negotiating positions, so as to help ensure maximum ownership from the government, private sector and civil society, as well as other key stakeholders. A process combining analytical research, consultations and consensus-building is essential for ensuring outcomes that can support the negotiating outcome in the particular country.

Given the requirement to satisfy the Modalities and the Negotiating Guidelines, any request should be comprehensive of all priority sectors and modes of supply in the other trading partner’s territory, but obviously with clear prioritisation of the concessions being sought that can more easily be translated into tangible commercial benefits, and potentially to support the development and maintenance of regional value chains. The request should also be prospective, looking to future opportunities, but remaining realistic as to what can actually be achieved in terms of export growth.

The Offer

The preparation of offers requires a detailed understanding of the existing state of regulatory affairs in the priority services sectors in the country. Information on the potential impact of possible services commitments will need to factor in how suppliers in that sector and producers in the rest of the economy may be affected, as well as potential impact on consumers (e.g. cost/quality of service availability, whether universal access objectives can be attained, etc). In contrast with initial private sector emphasis in the request preparation process, the preparation of offers are far more regulatory in nature and require much deeper engagement of government officials, including regulatory agencies, throughout the process. Nevertheless it is still important to effectively engage the private sector, civil society, labour unions and academia in this work, given the potential far-reaching impact on the domestic economy.

Similar to the preparation of the request, the extent of detailed information required to properly inform an offer in each country’s case is quite substantial. The volume of legal and regulatory information needed can be daunting. However, it is critical that such analysis is available to negotiators and decision makers before commitments are contemplated.

Preparing offers should be based on in-depth analysis and research, widespread consultations with diverse stakeholders and the building of consensus to ensure the required ownership among those most likely to be affected (both positively and negatively). The risk of economic and social dislocations arising from inadequately considered liberalisation commitments are real and can have harmful long term domestic impacts.

Like the requests, the offers from a member state must adhere to the Modalities and the Negotiating Guidelines, in that there should be substantial sectoral coverage and no a priori exclusion of modes of supply. However, they would apply to the commitments from the country making the offer rather than to the trading partner.

AUC’s facilitating role in the negotiations

The Department of Trade and Industry (DTI) of the African Union Commission continues to back stop the negotiations in the AfCFTA. As part of the preparation for the schedules negotiations, the DTI has facilitated the preparation of regulatory assessment (audit) exercises in twelve (12) AU member states, which have been undertaken by national consultants with knowledge of the regulatory landscape in the priority sectors. In each case the relevant government ministry responsible for trade has taken ownership of the resulting report delivered by the consultant. The regulatory assessments help to establish which regulations currently exist for the five priority service sectors, and serve as a basis for formulating offers and requests. In particular, awareness of existing regulations is necessary to avoid making commitments that contradict existing or potential policies. The information generated in the regulatory audit reports will prove useful as an input into the analysis that is required for the preparation of the requests and offers from member states. The intention is to broaden this support in order to ensure that regulatory assessment exercises take place in all the AU member states.

Conclusion

Careful preparation for services negotiations is essential, since services commitments last for the indefinite future and are extremely difficult to modify. One of the possible outcomes of scheduling commitments that are GATS plus or even RECs plus (where appropriate) is that it may lead to an even deeper level of integration among member states within the same REC, as well as lead to increased intra-Africa services trade. The schedules of specific commitments from each AfCFTA State Party will effectively reflect the single African services market intended by the Protocol. It remains to be seen how the member states will approach the negotiations and what precisely they will offer each other by way of commitments. The hope is that through their commitments, they will create a single African services market.

About the Author(s)

Beatrice Chaytor

Beatrice Chaytor

Beatrice Chaytor is an international trade lawyer, with over 25 years experience in providing  trade policy advice and support to African governments in their engagement with regional and international trade policy processes. She is currently Senior Expert – Trade in Services in the Department of Trade and Industry at the African Union Commission, based in Addis Ababa, and works on the negotiations for the establishment of the African Continental Free Trade Area (AfCFTA). Prior to her position in the AUC, Ms Chaytor ran her own law firm, Chariot Eight in Sierra Leone, providing legal services to international clients on corporate law matters.

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